The Monetary Accounting Standards Board issued a proposed accounting criteria update Monday that aims to make clear an issuer’s accounting for specified modifications of equity-categorized forwards and possibilities (this sort of as warrants) that stay fairness categorised following their modification.

The proposed update is centered on a consensus of FASB’s Emerging Issues Process Power. It would give guidance on how an issuer would evaluate and understand the impact of this sort of transactions, outlining a concepts-primarily based framework to choose whether an issuer would recognize the modification or exchange as an adjustment to fairness or as an price.

Some of FASB’s constituents have expressed uncertainty about how issuers ought to account for modifications or exchanges of freestanding fairness-categorized forwards and solutions thanks to a deficiency of explicit advice in FASB’s accounting benchmarks codification. They’ve requested the board to offer direction to clarify regardless of whether an issuer would account for a modification or an exchange of a freestanding equity-categorized forward or solution that stays fairness categorised following modification or exchange as (1) an adjustment to fairness and, if so, the relevant results on earnings for every share, if any, or (2) an expense and, if so, the fashion and sample of recognition. The proposed accounting criteria update aims to give that direction.

FASB is inquiring for constituents to critique the proposed accounting conventional update and give their opinions by Dec. 28, 2020.

FASB, GASB and FAF logos on the wall at headquarters in Norwalk, Connecticut

Courtesy of GASB